How To Supercharge Your Real Estate Investing. Borrowing From Your ...

Many Americans have taken to borrowing from their 401K plans and other retirement plan accounts to survive in this current economic climate. According to Fidelity (a top provider of workplace retirement plans) approximately 15% of 401K participants took loans from their accounts and 22% of those participants have loans outstanding carrying an average balance of 8,650.00.

Now, borrowing from your 401K (Retirement Plan) may seem like a sound idea (many have no choice) and it can be. Unfortunately, what most fail to understand is how to deploy those funds correctly. Several years ago after repeated blows to the head (figuratively), I finally understood what my business coach had tried so desperately to engrain into my ?old school? noggin: Live on a little less and re-invest the rest; maximize your money by increasing the velocity at which it grows. LIGHT BULB!

Let?s go forward with this blog post. Even with a traditional 401K (as opposed to a Roth or Self-Directed which I learned about soon after) it?s possible to generate a favorable return, despite the fees, penalties, and taxes. Real Estate was the key for me. By now the world knows (consider the throngs of foreign investors ?buying up? the U.S. For pennies on the dollar) there has never been a better time to capitalize on the U.S. Housing market. Using proven strategies that have stood the test of time, you don?t have to settle for simply surviving. Granted it?s imperative you surround or align yourself with those that have the knowledge, expertise and systems in place to guide you and mitigate the risk. Deployed properly, in most cases you?ll experience significant returns, dwarfing those of standard investment vehicles such as CDs and other Retirement Plans relying on the stock market for instance.

401K Fallout2.flv ? YouTube: ?The 401(k) Fallout.?Part two of two from sixty Minutes segment by Ira Rosen. Let us hear your comments!

Prior to borrowing from your 401K consider other sources of cash or ways to cut expenses. If you have a whole life insurance policy you can borrow up to the full cash value and you will not have to repay it. You can withdraw contributions from your Roth IRA tax free and penalty free under certain circumstances (check with your financial/tax advisor); or take that Roth and convert it to a self-directed version for ultimate check book control. In the event you must borrow from your 401K here are a few things to be aware of:

1) you?ll have to pay the loan back in five years, except for home purchases which are eligible for a longer period.

2) Most employers deduct loan repayments from your paycheck!

3) you?ll have to pay interest, usually prime plus one or two points. The interest you pay does go back into your account; however, it may not be ?free? though. If your fund is earning 8% as an example and you borrowed at 6% you lose points and the future compounding interest on the lost points.

4) Default will not hurt your credit score, but you?ll owe income taxes, plus 10% early withdrawal penalty (if you?re less than fifty-nine and a half years old and still working).

5) If you quit, or lose your job, you?ll have to pay it back typically within in sixty days. If not the money will be treated as a distribution, subject to federal and state taxes and 10% penalty if you?re less than fifty-five years of age.

Sam Ally invites you to learn how to earn exceptional returns on your investment dollars and secure your future by partnering with America?s #1 Real Estate Network. Join us for an upcoming Commercial Real Estate presentation online to get information or to get started now.

Go here to learn more about Borrowing From Your 401K and see additional Tips/Articles by Sam Ally.

Source: http://retirement-401k.com/how-to-supercharge-your-real-estate-investing-borrowing-from-your-401k/

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